India should either push forward with economic reforms or abandon it completely; the country cannot remain in a state of policy paralysis as it is today, said S. Neelakantan, former director, Madras Institute of Development Studies.

Tracing India's growth story, Prof. Neelakantan explained that the socialist thrust behind India's economy had its origin in the resolution passed at the Avadi Congress session in 1955. The policy was pursued vigorously by successive governments until 1991. However, this top-down approach – where major economic decisions are made and executed by the government – led to over-regulation, and fruits of economic development were pocketed by people who could reach to the corridors of power. The ‘visible hand' of the government failed to provide the necessary growth to alleviate poverty from society. Hence the government ushered in economic reforms where market forces started playing a major role .

The country now finds itself in a piquant situation of inheriting only the vices of socialism and capitalism, Prof. Neelakantan said speaking at the valediction of the ‘National Conference on Twenty Years of Economic Reforms and Inclusive Growth in India,' at St.Joseph's college here on Tuesday.

Inequalities will always be there in market-driven economy as market tends to celebrate and embrace meritocracy as against reservation, and efficiency as against equality, he said.

People like Ilayaraja, A.R.Rahman, Dhirubhai Ambani, and Steve Jobs rose to prominence because of their own skill. However, according to Prof. Neelakantan this celebration of meritocracy is not without its own share of flaws, as merit, according to him, is the gift of nature and not everyone is equally endowed with this natural gift of merit. “Meritocracy is intolerable and is a complete injustice on a lot of people who have suffered discrimination for generations,” he said.

While this is the argument of the votaries against meritocracy, the pro-meritocracy and anti-reservation camp-followers feel that reservations, which favour some over others on the basis of certain assertions, are equally unjust.

‘Invisible hand' of the market, according to proponents of free-market philosophy, should have the free reign in resource allocation. But markets fail because of information-asymmetry, as not all participants in a purely market-driven system will have the right information at their disposal to take economically prudent decisions. Hence, market generated growth will always lead to unequal growth and as quoted by Alfred D.Chandler the ‘visible hand' is always needed to correct market failures.